Sample Approval Letters

Note: We have found our approval letters appearing on other’s websites so we no longer make available a full list of our approval letters.


What to look for in an approval letter:

 

  1. We are not attorneys so if you have any questions about specific approval letter language then contact an attorney.
  2. You will see the language release of lien (this is required to notify escrow/title) they are releasing their security interest in the property) so property can be sold.
  3. There is standard language stating selling party, buying party, sales price, closing costs, close of escrow date, closing agent instructions, etc.
  4. All lender’s legal department have their own way they draft the satisfaction of debt or deficiency language so read letter carefully.
  5. Few lender state ‘no deficiency judgment’ or ‘investors will not pursue deficiency judgment’ (Countrywide used to use that language but no more).
  6. Some lenders will state how they will report the short sale to the credit bureaus “Paid in full for less than the full balance” is common.
  7. Approval letters for first mortgages are typically longer but junior lien approval letters are very important to read carefully since they are possibly giving up their right to pursue borrower in the event property went to trustee sale and it was a non-purchase money loan.

See the following examples of how it is important to carefully review the approval letters for proper language.

 

You should have an attorney review the approval language if you have any questions.

 

About 20% of the time approval letters have language that does not give a satisfaction of the debt or ask for contribution from the seller.

 

We get this language changed about 50% of the time but occasionally in cases where there has been a significant amount of cash taken from a second or third lien then the bank digs in.

 

Letter w/ No Satisfaction of Debt

Revised Letter

 

If a seller finds themselves in that situation they will have to weigh the options and make the best decision then.

 

We include in our listing agreement and require buyers to include in the purchase contract that the seller must be satisfied with approval letter language before escrow will be opened.

 

This allows you to be in the driver’s seat about whether to continue with the short sale or take another course of action (see examples of this).

 

MOT Example

ADM Example

 

MOT language: (makes agreement contingent upon your review and satisfaction of approval letter)

 

  1. Sale is contingent upon seller’s approval of all short-sale lender’s written consent (approval letter(s)) prior to opening of escrow.
  2. Buyer of property will be required to use SSA and ADM with language that affirms 'seller approval contingency' and references how timelines will begin per the SSA agreement.
  3. When RLA and RPA reference 'seller pays' all parties understand this means the short selling lender(s) pay.
  4. With the exception of past HOA dues and HOA doc preparation fees, all costs including commissions, fees, closing costs, past taxes, etc are to be paid by the buyer or lender.

 

ADM language: (text required of buyer to agree to)

 

  1. Sale of property is contingent upon seller agreeing to accept short-sale lender's written consent (approval letter(s)).
  2. SSA - Short Sale Addendum to be included in RPA - Residential Purchase Agreement.
  3. Per Paragraph A of the SSA, both parties agree that the seller's approval of short-sale lender's consent and notification to buyer's agent prior to opening escrow will satisfy the SSA Paragraph A ii clause that 'if seller fails to give buyer a copy of short-sale lender's written consent' then buyer may cancel. Buyer retains the right to cancel at anytime prior to the short-sale contingency date and after escrow is opened within the buyer investigation timelines as stated in the RPA. Buyer shall be entitled to a full return of any deposit if agreement canceled within those contractual timelines.
  4. Timelines will be handled Per SSA Paragraph B1 ii and the seller will deliver written notification of short-sale lender's consent (by email or fax) to buyer's agent and contractual timelines will begin the following day.

 

Please review the important free information regarding tax implications, credit, deficiency judgments, and especially the market update / forecast to get a better view of the full picture on where you stand so you can decide best path to take.

 

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